professional liability

A type of liability coverage designed to protect traditional
professionals (e.g., accountants, attorneys) and quasi-professionals
(e.g., real estate brokers, consultants) against liability incurred
as a result of errors and omissions in performing their professional
services. Although there are a few exceptions (e.g., physicians,
architects, and engineers), most professional liability policies
only cover economic or financial losses suffered by third parties,
as opposed to bodily injury (BI) and property damage (PD) claims.
This is because the latter two types of loss are typically covered
under commercial general liability (CGL) policies. The vast majority
of professional liability policies are written with claims-made
coverage triggers. In addition, professional liability policies
contain what are known as "shrinking limits," meaning that unlike
CGL policies (where defense costs are paid in addition to policy
limits), the insurer's payment of defense costs reduces available
policy limits. Accordingly, when attempting to determine appropriate
policy limits, insureds must consider the fact that because defense
costs are often a high proportion of any claim settlement or judgment,
they must usually purchase additional limits. The most common exclusions
in professional liability policy forms are for BI, PD, and intentional/dishonest
acts. See also
Accountants professional liability insurance;
Architects
and engineers (A&E) liability coverage;
Errors and
omissions (E&O) insurance;
Lawyers professional liability
coverage;
Management
liability insurance;
Medical malpractice insurance;
Shrinking limits defense provision.